This article considers whether the emergence of business models based on free digital delivery of music and other content have rendered copyright protection less necessary or justifiable. Falling production and distribution costs have led many scholars and popular commentators to conclude that creators can and should embrace free distribution models for copyrighted works. In particular, many contend that the recording industry can survive and prosper by producing and freely distributing recordings as a form of advertising for the concert business. Some have further concluded that copyright law may need to change to reflect this new reality.

This article assesses such proposals, drawing insights from cultural economics, the literature on the economics of copying, and empirical data regarding the health of the concert industry. When free business models work, they can work quite well (e.g., Google and, long before it, commercial broadcasting). Examination of theory and practice shows, however, that such models are practicable and desirable only under certain, specific circumstances.

The success of free business models depends on a fairly tight link between the free content and a sufficiently remunerative good or service. Concert revenue is not particularly tightly linked to free recordings - certainly not as tightly as examples such as open source software and support services, or online children's games and plush toys. Moreover, the concert business is lucrative mostly for older, well-established acts. The data collected here on concert revenues indicates that a handful of older acts now make most of the money in the concert business, while ticket prices for smaller, niche acts have stagnated over the last decade. Although much maligned, the modern record business supports a vast, remarkably diverse variety of recordings. If it had to rely on concert revenue alone, some acts would probably continue to record, but diversity and consumer choice and welfare would likely decrease.

The shortcomings of the live performance model indicate that the existence and occasionally tremendous success of "free" business models do not justify wholesale changes in copyright policy or legal doctrine. Business models based on direct sales and supported by copyright still provide tremendous advantages for creators and consumers.

Ben Barros

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